Thursday, December 11, 2008

Republic Windows and Doors Received a Bailout from Chicago Before It Bailed Out of Chicago

This story gets deeper by the day, but only a few outlets are trying to paint a comprehensive picture. Thankfully, history will contain these alternative readings. The leading narrative describes the worker' sit-as a great historical moment in labor activism. I agree with that account. The rest of the dominant story, however, requires greater scrutiny and revision. While most accounts portray the workers' activism and political protests as a defeat of "greedy" banks, a closer look shows that this angle reflects fantasy more than reality.

Yesterday, I posted an essay that examines Republic Windows and Doors. To date, the company has been curiously missing from most accounts of the sit-in, even though it, not Bank of America, violated the workers' rights secured by state and federal law. While the company has basically escaped critical analysis, it is probably the most culpable player involved.

Although progressives have used this moment to vent anger over the bailout and banks, Republic Windows recently completed a series of transactions in which it shut down its Chicago factory, discarded its Chicago labor without providing the statutorily required notice, and purchased and combined its operations with a company located in Iowa where it can now process the same orders but pay workers less money. But due to misdirected progressive anger and a completely uncritical news media, Bank of America and JP Morgan Chase have provided financing to the company so it can complete these transactions and escape liability under labor law.

The Bailout No One Wants to DiscussIf that weren't already enough irony, it also turns out that Republic Windows and Doors, like Bank of America, received an enormous governmental subsidy, sometimes described as a "bailout." In 2002 and 2003, the company received $9.3 million from the Chicago to construct a new factory. Prior to the building project, the company threatened to leave the city, arguing that it had outgrown its space. Chicago provided the money using a development tool known as "Tax Increment Financing" (or TIF). Under a TIF setup, cities invest in development projects under the theory that the investments will generate higher tax revenue, as improvements to blighted areas increase property values. Chicago (and other cities) has created several TIF districts that fund various projects, hoping to profit from the development activity through future taxation. Now that Republic Windows and Doors has fled the scene, the whole theory behind the subsidy has evaporated. Some local politicians are trying to figure out how to recoup the city's subsidy. Good luck.

Republic Windows and Doors took $9.6 million from the City of Chicago, and now two banks have provided nearly $2 million to pay the company's debt to its employees. But the only villain in this story remains Bank of America. What interests are served by not telling a fuller story that includes scrutiny of this company? Given Chicago's deep history of political corruption, news media should at least try to determine whether any powerful individuals helped the owners of the company vanish from Chicago overnight, set up shop in another state, discard its workers, escape negative media attention, and avoid liability under state and federal law.

Possible Leads?Some websites report that Chicago Monarch (sorry - I mean "Mayor") Richard Daley secured TIF funding for the company. According to a report by a Chicago NBC affiliate, Daley backed financing after previously expressing deep disagreement with the concept of TIF investments altogether. Also, his brother William Daley chairs the JP Morgan Midwest regional offices. Yesterday, JP Morgan extended $400,000 to the company for the purpose of paying the workers. And Governor Blagojevich abruptly banned Bank of America from transacting business with the State of Illinois one day prior to his arrest for trying to sell Obama's vacated Senate seat. Apparently, the bank gave in to the governor's pressure. All of these moves benefit the company primarily and the workers incidentally. Fox Mulder keeps coming to mind with this story: "Trust No One."

9 comments:

Jerry Wiesner
said...

I couldn't agree more with your observation that the real story here hasn't even been reported - Republic Windows and Doors did a factory swap and simply shifted it's operations to a newly created company with a lower cost work force. The basic facts of this piece of the story were reported in the initial Chicago Tribune article but there was no further comment or suggestion that something wasn't right about the company shutting down and leaving it's workers stranded right before the Holiday's while at the same time the CEO's wife was listed as the Administrator of a newly created corporation in Iowa with all the senior leaders from Republic Windows and Doors as it's officers.

Thanks for visiting, Jerry. Piece by piece, the story gets told. I am amazed that it has not generated as much attention as Bank of America. I guess it was easier and more profitable to beat up a national bank - than a local company. Now, the governor scandal will probably delay or even preclude any substantial mainstream reporting of the true complexity of this story.

Thanks for filling in the missing pieces of the story. I thought it was odd, too, the emphasis on the bank instead of the company. I never watch tv news anymore, but I had seen coverage of this at my mother's and it struck me as incoherent.

The most interesting aspect of this whole story is that majority of those workers are in this country illegaly. Because of the seniority rules only the people that were hired a long time ago were left. These people were hired before the strict immigration rules were established.All this poor people cannot get another job and cannot get unemployment benefits.

Professor Hutchinson I was researching why V.P. Biden, Sen. Burris, Sen. Durbin flew in from Wash DC for the re-opening of a relatively small PVC window company in Chicago, and ran across your very insightful article. Would you venture to guess why this received so much attention.

The reason I am researching this is because I am in the window extrusion industry and trying to figure out what happened to Republic and where Serious Materials is getting all the money to buy up failing PVC Window companies. Republic is not the first failing company Serious has purchased.Most window companies are operating at 25% of capacity. Even the well managed companies do not have cash to repair their machines let alone purchase failing businesses.Also interesting is the fact that in last weeks speeches at Republic's old plant, Biden, Durbin, Burris, Daley all came out to say there will be a lot of government business for the new company. Durbin mentioned putting all new windows in the Sears Tower purchased from Serious Materials.It appears Serious Materials received ARRA dollars and will get government contracts. If they make the most energy efficient windows, then great. If they get preferential treatment, then it is unfair and it will kill the remaining competing window manufactures.It sure gives the appearance that our new government gives tax payer dollars to its favorite company and then gives them the business. Those connected to the government profit, those that do not suffer. Would you consider this a form of socialism?By the way. I am a fiscally conservative person from the NW Suburbs of Chicago who thinks the constitution is brilliant and needs to be followed. I am very concerned that it will be rewritten for the good of a few.I find what you write, inspired and intelligent. Just found you blog last night and have spent 4 hours reading from your archives. You may have a new fan in Chicago. Bob Palatine

Hell, Bob. Thanks for the comments and the update. I find this infromation very interesting. Do you have a link on the Sears Tower issue? It is not city owned. Is the city helping to pay for upgrading it? When I get a chance, I will do some more research into this issue. I guess I should not be surprised that the news media has not covered thesee developments.

About Me and the Blog

Professor Darren Hutchinson teaches Constitutional Law, Remedies, Race and the Law, and a Civil Rights Seminar at the University of Florida Levin College of Law. Professor Hutchinson also holds the prestigious Stephen C. O’Connell Chair.
Professor Hutchinson received a B.A. from the University of Pennsylvania and a J.D. from Yale Law School. Before teaching law, Professor Hutchinson practiced commercial litigation at Cleary, Gottlieb, Steen and Hamilton in New York City. He also clerked for the late Honorable Mary Johnson Lowe, a former United States District Judge in the Southern District of New York.
Professor Hutchinson's research has appeared in many prestigious journals including the Cornell Law Review, Washington University Law Review, UCLA Law Review, University of Michigan Journal of Race and Law, and University of Pennsylvania Journal of Constitutional Law.
He has also presented his research at numerous universities, including Yale, Stanford, Columbia, University of Pennsylvania, University of Michigan, University of California at Berkeley, University of Virginia, Cornell, Georgetown, and Boston University.

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